Technical support failed yesterday and the market is likely headed lower. Fear continues to spike and the market is very oversold technically. Nevertheless, these measures are relative.
That is to say, relative to the recent low volatility uptrend experienced over the past few years, fear is extreme and oversold conditions are extreme. This causes traders to look for a bounce. But measured against the 2001-2002 market correction, the numbers aren't quite so extreme. In fact, they are still mild.
Keep in mind that the Fed is going after the credit bubble and in doing so, stock prices are sure to suffer consequences.
In our opinion, this is good healthy behavior. This market was getting to be nearly impossible to trade, but now has a fresh breath of life due to the selling. It takes some adjustments to get used to, but there are some excellent opportunities in this market that just didn't exist over the past few years and certainly not over the past year.
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